CHINA BANKING CORPORATION VS COMMISSIONER OF INTERNAL

REVENUE
G.R. NO. 175180 FEBRUARY 27, 2013

FACTS:
For the four quarters of 1996, petitioner paid Il93, 119,433.50 as gross
receipts tax (GRD on its income from the interests on loan investments,
commissions, service and collection charges, foreign exchange profit and
other operating earnings. In computing its taxable gross receipts, petitioner
included the 20% final withholding tax on its passive interest income.
The Court of Tax Appeals (CTA) , wherein it ruled that the 20% final
withholding tax on a banks passive interest income should not form part of
its taxable gross receipts.
Pursuant to such decision, petitioner filed with respondent a claim for refund
on April 20, 1998, of the alleged overpaid GRT for the four (4) quarters of
1996 in the aggregate amount of P6,646,829.67.
The CTA, agreed with petitioner that the 20% final withholding tax on interest
income does not form part of its taxable gross receipts. However, the CTA
dismissed petitioners claim for its failure to prove that the 20% final
withholding tax forms part of its 1996 taxable gross receipts. And that,
petitioner failed to prove the inclusion of the 20% final withholding taxes as
part of its 1996 taxable gross receipts (passive income) or gross receipts
(passive income) that were subjected to 5% GRT, it follows that proof was
wanting that it paid the claimed excess GRT.
Petitioner appeal before the Court of Appeals
In its appeal, petitioner insists that it erroneously included the 20% final
withholding tax on the banks passive interest income in computing the
taxable gross receipts. Therefore, it argues that it is entitled, as a matter of
right, to a refund or tax credit. However, the CA denied petitioners appeal.
ISSUE:

Whether or not the CA erred in holding that petitioner has failed to point to
the legal basis for the exclusion of the amount of tax withheld on passive
income from its gross receipt for the purpose of taxation?

HELD:
No. The Court ruled that As held in the case of In China Banking Corporation
v. Court of Appeals the amount of interest income withheld, in payment of
the 20% final withholding tax, forms part of the banks gross receipts in
computing the GRT on banks.
Gross receipts comprise "the entire receipts without any deduction." Clearly,
then, the 20% final withholding tax should form part of petitioners total
gross receipts for purposes of computing the GRT. Petitioners reliance on
Section 4 (e) of RR 12-80 is misplaced as the same was already superseded
by a more recent issuance, RR No. 17-84, which provides that:
Revenue Regulations No. 12-80, issued on November 7, 1980, had been
superseded by Revenue Regulations No. 17-84 issued on October 12, 1984.
Section 4 (e) of Revenue Regulations No. 12-80 provides that only items of
income actually received shall be included in the tax base for computing the
GRT.1wphi1 On the other hand, petitioner failed to point to any specific
provision of law allowing the deduction, exemption or exclusion from its
taxable gross receipts, of the amount withheld as final tax. Besides, the
exclusion sought by petitioner of the 20% final tax on its passive income
from the taxpayers tax base constitutes a tax exemption, which is highly
disfavored. A governing principle in taxation states that tax exemptions are
to be construed in strictissimi juris against the taxpayer and liberally in favor
of the taxing authority and should be granted only by clear and unmistakable
terms., thus:
Section 7. Nature and Treatment of Interest on Deposits and Yield on Deposit
Substitutes.
(a) The interest earned on Philippine Currency bank deposits and yield
from deposit substitutes subjected to the withholding taxes in
accordance with these regulations need not be included in the gross
income in computing the depositors investors income tax liability. x x
x

(b) Only interest paid or accrued on bank deposits, or yield from

deposit substitutes declared for purposes of imposing the withholding
taxes in accordance with these regulations shall be allowed as interest
expense deductible for purposes of computing taxable net income of
the payor.
(c) If the recipient of the above-mentioned items of income are
financial institutions, the same shall be included as part of the tax base
upon which the gross receipt tax is imposed.
Revenue Regulations No. 17-84 categorically states that if the recipient of
the above-mentioned items of income are financial institutions, the same
shall be included as part of the tax base upon which the gross receipts tax is
imposed.
Petitioner also failed to point to any specific provision of law allowing the
deduction, exemption or exclusion from its taxable gross receipts, of the
amount withheld as final tax. Besides, the exclusion sought by petitioner of
the 20% final tax on its passive income from the taxpayers tax base
constitutes a tax exemption, which is highly disfavored. A governing principle
in taxation states that tax exemptions are to be construed in strictissimi
juris against the taxpayer and liberally in favor of the taxing authority and
should be granted only by clear and unmistakable terms.

CENTRAL LUZON DRUG

INTERNAL REVENUE
G.R. NO. 181371

CORPORATION

VS

COMMISSIONER

OF

MARCH 2, 2011

FACTS:
On April 13, 2005, petitioner filed with respondent Commissioner of Internal
Revenue (CIR) a request for the issuance of a tax credit certificate in the
amount of P32,170,409, representing the 20% sales discounts allegedly
granted
to
senior
citizens
for
the
year
2002.
On April 14, 2005, petitioner filed with the Court of Tax Appeals (CTA) a
Petition
for
Review.
On July 23, 2007, the First Division of the CTA rendered a Decision denying
petitioner's claim for insufficiency of evidence.
Aggrieved, petitioner moved for reconsideration but the First Division of the
CTA denied the same in a Resolution dated September 12, 2007.
On October 3, 2007, petitioner filed a Motion for Extension of Time to File
Petition for Review on Certiorari with the CTA En Banc.

On December 4, 2007, the CTA En Banc resolved to deny due course, and
accordingly, dismissed the Petition for Review.
This prompted petitioner to file before us a Petition for Review on Certiorari
under Rule 45 of the Rules of Court to set aside the Resolutions dated
December 4, 2007 and January 17, 2008 of the CTA En Banc.
In response, comments were filed by the respondent and the Office of the
Solicitor General (OSG), as counsel for respondent.
However, instead of filing a reply to the comments, petitioner filed a Motion
to Withdraw, praying that the case be dismissed without prejudice. According
to petitioner, the amount of tax credit being claimed for 2002 would just be
included in its future claims for issuance of a tax credit certificate since the
said amount was carried over to its 2003 Income Tax Return (ITR).
The OSG does not oppose the Motion to Withdraw. However, citing Section 2,
Rule 17 of the Rules of Court, the OSG argues that the withdrawal of the
instant case is no longer a matter of right on the part of petitioner, but is
discretionary upon the Court. The OSG also calls attention to the failure of
Mr. Jacinto J. Conception, the person who signed the Verification and
Certification of Non-forum Shopping, to exhibit before the notary public a
valid Identification Card. The OSG insists that such failure renders the instant
Petition
defective.
ISSUE:
Whether the dismissal is prejudicial against petitioner?
HELD:
YES. Section 1, Rule 13 of the Internal Rules of the Supreme Court provides
that "[a] case shall be deemed submitted for decision or resolution upon the
filing of the last pleading, brief, or memorandum that the Court or its Rules
require." In the instant case, records show that on August 19, 2009, the
Court resolved to require petitioner to file a reply. Instead of complying,
petitioner opted to file a motion to withdraw. Clearly, by requiring petitioner
to file its Reply, the Court has not yet deemed the case submitted for
decision or resolution. Thus, the Court grant petitioners Motion to Withdraw.
However, the Court agree with the OSG that the dismissal of the instant case
should be with prejudice. By withdrawing the appeal, petitioner is deemed to
have accepted the decision of the CTA. And since the CTA had already denied
petitioner's request for the issuance of a tax credit certificate in the amount
of P32,170,409 for insufficiency of evidence, it may no longer be included in

petitioner's future claims. Petitioner cannot be allowed to circumvent the

denial of its request for a tax credit by abandoning its appeal and filing a new
claim. To reiterate, "an appellant who withdraws his appeal x x x must face
the consequence of his withdrawal, such as the decision of the court a quo
becoming final and executory."